The Ninth Circuit joins the Seventh Circuit and
NLRB, determining that class action waivers violate the National Labor Relations
Act and are therefore unenforceable.

This article was published in the August 23, 2016, issue
of the National Law Review.

The question is simple: does an employer violate the National Labor
Relations Act (NLRA) by requiring employees to sign an agreement precluding them
from bringing class and collective actions regarding their wages, hours, and
terms and conditions of employment, and instead to arbitrate those claims on an
individual basis?

The answer, on the other hand, varies depending on which forum and which
appellate court an employer happens to find itself in.

The central players on this issue, until recently, have been the
National Labor Relations Board (NLRB) and the Fifth Circuit. The NLRB repeatedly
has made clear its view on the matter, holding in dozens of cases that class and
collective action waivers in individual employment arbitration agreements
violate the NLRA. Unfortunately for the NLRB, employers have the option to
appeal an NLRB decision to the D.C. Circuit, or to any circuit in which the
business has sufficient business operations. As a result, employers with
operations in Texas, Louisiana, or Mississippi have appealed adverse NLRB
decisions invalidating their collective action waivers to the Fifth Circuit,
where the Court has rejected the NLRB’s position not once but
twice, and has consistently ruled that class and collective action waivers
are lawful and unenforceable under the Federal Arbitration Act.

The national narrative followed this
same pattern – with the NLRB finding the waivers unlawful and the federal
appellate courts disagreeing with the NLRB – until this past May when the
Seventh Circuit sided with NLRB’s interpretation on the issue. The Seventh
Circuit explained that given the NLRA’s “intentionally broad sweep, there is no
reason to think that Congress meant to exclude [protection of] collective
remedies from its compass.” The Seventh Circuit decision made it the first and
only federal appellate court to side with position staked out by the NLRB.

Until now.

On August 22, a split three-judge Ninth Circuit panel
issued an opinion agreeing with the Seventh Circuit and NLRB on this issue.The plaintiffs in the Ninth Circuit decision are a group of employees who
filed a class action lawsuit alleging that their employer improperly classified
them as exempt from California and federal law requiring that they be paid
overtime compensation. Their employer sought to dismiss the lawsuit on based on
arbitration agreements the putative class members signed in which they agreed to
waive their right to bring class or collective action claims and instead to
arbitrate their claims on an individual basis. The Ninth Circuit panel refused
to enforce the waivers, explaining that in its view, it is a well-established
principle that “employees have the right to pursue work-related legal claims
together,” and this right “is the essential, substantive right established by
the NLRA.”

The Ninth Circuit remanded the case to the District Court with
instructions for the Court to determine whether the collective action waiver was
severable from the remaining provisions of the agreement, specifically the
agreement’s arbitration provision.

The Ninth Circuit decision widens the circuit split, making it much more
likely this issue of class and makes its way to the Supreme Court, sooner,
rather than later. However, given that the Supreme Court is operating at less
than a full complement, it remains to be seen whether the NLRB risks a split
decision and appeals the Fifth Circuit’s
Murphy Oil decision, or whether it sits back and waits for one of
the employers in recent Seventh and Ninth Circuit decisions to take the matter
to the nation’s high Court. Until then, employers in the Seventh and Ninth
Circuit are unable to avoid class and collective actions by enforcing waivers.

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